Southwest Airline
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Southwest Airline Analysis
Background Information
South West Airlines Co. offers scheduled air transportation services in the United States and nearby the international markets. The firm controls Southwest Airlines, one of the key carriers in terms of originating passengers boarded; Boeing 737-700 aircraft, Boeing 717-200 aircraft, Air Tran Airways, and operating a fleet of airlines services across the United States to select the international locations. According to VVV, Southwest Airlines was founded by Herbert D. Kelleher in 1967. He believed that staying within Texas would help in avoiding the federal regulations. Regardless, several airlines initiated legal action against the Airline, but in 1970, the Texas Supreme Court ruled Southwest and allowed it to fly within Texas.
When the Airline started its operations in 1971, it covered interstate Texas cities, San Houston and Dallas. At this time, the airline president, Lamar Muse, developed a love theme that played a key role in attracting many passengers based at the Love Field in Dallas. Indeed, in executing the love theme, various efforts were developed, which included changing the offered things’ names. Drinks were referred to as love options, while the ticket machines were identified as love machines. Besides, the low-cost fares which were offered by the Airline played in created its popularity. The low fares were below the cost of driving a vehicle over the same route, making the Airline favorable to many travelers.
However, the Company experienced challenges, especially stiff competition from its competitors. For instance, Baniff international started a 60-day sale of tickets at a half-price was between Dallas and Houston. It offered tickets at a low price of $ 13, while Southwest offered similar tickets at $ 26. Southwest had to develop a counter-strategy, and it created an advertisement claiming that no one was going to shoot the Company out of the sky for $ 13. Besides, it provides various alternatives to the customers to pay $ 13 or $ 26 for the same seats. The customers who paid $ 26 were given gifts such as whisky and ice buckets. Indeed, the strategy was effective as 80% of the consumers purchased the $ 26 tickets. Indeed, over the years, the Company effectively grew due to key strategies focused on increasing the consumers and profitability of the Company. For instance, in 1993, when the firm obtained the Morris Air, its strategy was to limit the markets served and ensure an increase in the frequency of departures to a specific destination. This helped in reducing the consequences of missed flights and allowed the Airline to retain its passengers.
Pestle Analysis
Pestle analysis of the southwest airlines gives detailed information about the challenges and the problems that the Company is facing in the Company’s environment. mostly these factors that impact the performance of the Company may be classified under political, economic, social, technological, legal, and environmental factors which mostly affect how the Company operates and its profitability.
Political factors
These are factors that play an important role in establishing which factors will impact the performance of the Southwest Airlines Company. Southwest Airlines Company operates in different countries, making it exposed to different political factors and environments, and also exposed to many and different political systems risks. To achieve its success in such different environmental, political systems, Southwest Company has to diversify risks that are systematic in the political environment. However, the company political factors that affect the Company in general include; the political instability and the significance of regional Airline in the economy of a certain country. in countries where there is conflicts war, and there is no peace; the Company will be unable to operate effectively in such an environment. The country’s political system may not consider the importance of regional airlines, which disadvantages southwest Company as it may find it difficult to operate in such a political environment. The level of corruption in most of the countries that the Company operates in greatly impacts the Company’s performance as that government requires the Company to employ the local people in those countries who are the most corrupt. These employees employ their relatives in the Company, embezzle funds allocated from the Company’s development in that country, which lead to slow growth of the Company in those countries and poor performance in terms of profit margins. Another political factor that affected the performance of the Company is high taxes imposed by the governments and lack of protectionism of companies and industries in some countries in which the Company is operating in. The Company found its hand in providing its services in such countries as the Company cannot compete with other airline companies. Besides, there are tuff regulations and guidelines provided by the government in which the Company operates, for the aviation industry, which is mainly due to the risks associated, and that may cause accidents or death. These regulations and other policies imposed to protect the passengers are so harsh for the Company to follow. Besides, most of these political factors have a negative impact on the Southwest Airline Company as it loses customers and the profit margins decrease due to unsmooth operation.
Economic factors.
Economic factors have a heavy influence on Southwest Airlines’ company operations in terms of finances. Due to economic recessions in most countries, the Company found itself in the lowest period. Which was as a result of the decline in premium and economy traveling in those countries. Other eternal environmental factors like inflation and fluctuating foreign exchange rates have greatly affected the Company negatively as it increases the traveling charges to cope with the current situations. Still, on the other side, customers cannot afford the increased traveling charges. In some countries, government intervention gives companies subsidies, reduces taxes, or even gives tax holidays to companies operating in that country. This significantly helps the Southwest Airline Company as it lowers the travelling charges which attracts more customers to use their services as they are cheap and affordable. With this the Company is able to increase the profit margins. Moreover, Southwest Airline Company have shown a lot of struggle due to increased labour demand that are made by the employees of the Company. All these negative economic factors have led to increased poor performance of the Company and bankruptcies.
Social factors
Like any other business Southwest Airline Company have created social values due to changes of the consumer in the modern life. Social factors have affected the Company as most of the customers, in the new culture, prefer the airlines with extended services at a low cost of travelling. Few years ago, the Company have experienced big losses due to the change of traveling classes as the culture of people have changed. The change on how people are communicating in the modern as people prefer holding meeting online by use of Skype feature and holding conference meetings via video call rather than travelling. Lack of skills among people in the population and their attitude towards work is a social factor that affects the performance of the Company in area in which the Company operates.
Technological changes.
The significance of technological factors and how they affect the performance of the Company can be understood from the perspective of large use of technology in the world and in the airline industry. Currently, passengers want to access check-in and ticketing services online at their places with their gadget at hand without applying ticketing or booking manually. It challenges the Company as it have to improve its technological way of doing things in order to satisfy their customers, which needs them to incur extra costs. Southwest Airline Company have to advertise its services with social platforms with an aim to reach all customers and create awareness of the Company in the airline industry to attract more customers to their services. Advertising have helped the Company increasing awareness of the Company in the world which have increased the number to clients for the Company. Moreover, the advancements in technology increases the chances of the Southwest Airline Company in gaining more profits in its operation as it can provide the services desired by customers on the safety better services.
Legal factors
Like other factors as political and economic factors, legal factors have great impacts on the performance of Southwest Airline Company. Legal fact0ors or the legal issues are laws that are set for the airline company to follow as it provide its services in the airline industry. Such laws requires airline companies to offer high quality services on terms of safety and the Company is held responsible of the air crashes that may occur, any damage on either good or passengers on travel.
Environmental factors.
Different countries have different environmental norms and standards which impacts the profitability of the Southwest Airline Company. Some of these environmental factors include weather, recycling, climatic changes and waste management services. In the example of fuel issues the Company have to invest heavily on fuel- efficient aircrafts in order to adhere with requirements of preservation of environment and reduce air pollution. And the investment lowers the profit margin of the Company.
In conclusion, southwest Airline Company have struggled with these factors in order to survive and make profits in the airline industry. Stiff competition, increased cost of doing business, struggle to adhere to rules and regulations have affected the profitability of the Company. Additionally the analysis will help in identifying weak areas and what effort is required in improving the Company.
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